top of page
  • Writer's pictureJamie Stone

Latest property price forecasts revealed. What’s ahead in the next year or two?

Written by Michael Yardney 19th November 2020.

What’s the outlook for the Australian property markets for the rest of 2020 and into 2021?

This is a common question people are asking now that our real estate markets are working their way out of the effects of the Coronavirus Pandemic and out of Australia’s first recession in 30 years.

I guess they’re looking for property market prediction or forecasts – they’re wanting to know what’s going to happen to real estate prices moving forward.

Well forecasting is difficult – especially about the future – but in this detailed article I’ll explain what our research suggests is ahead for Australian house prices in the next decade till 2030.

But let’s start with the current economic climate. It’s been a weird recession hasn’t it?

We’re in the middle of a worldwide pandemic, unemployment is high, yet our housing markets have remained resilient.

In fact there are increasing signs that the modest coronavirus induced housing correction came to an end in the middle of October 2020 and that our housing markets are on the move again.

There has been a palpable change in market sentiment on the ground and this is reflected in strong buyer activity at a time when there is a little good stock on the market.

Here are some of the indicators suggesting we have passed the bottom of this property cycle:-

  • Consumer confidence has been gradually improving, as has business confidence

  • Auction clearance rates have been consistently strong, not just in the two big auction capital of Melbourne and Sydney but around Australia.

  • More buyers and sellers are in the market and transaction numbers have increased considerably.

  • At the same time the banks are keen to write new business – another positive for our housing markets.

  • Bank loan deferrals have been falling – there’s little likelihood of an avalanche of forced mortgagee sales

  • The recent rate cut and the “guarantee” of rates remaining low for at least 3 years, will give home buyers and investors confidence

  • Moving forward further jobs creation, consumer confidence and business confidence (leading to spending and employment) will underpin our housing markets.

Just to make things clear…we’re not going to fall off a fiscal cliff as some naysayers predicted.

And there is no Australian property bubble that’s about to burst as those perma bears keep telling us.

Quite the opposite – there is a perfect storm of positive factors developing for our property markets next year – a confluence of multiple growth drivers which will propel our property markets into 2021 and 2022.

ANZ Bank economists recently said their initial house price forecast on the decline of 10% from peak to trough has proven too pessimistic.

Instead they are forecasting price gains of around 9% across Australia’s capital cities next year.

While there are still many challenges ahead for our economy and our property markets, there are many reasons to be optimistic about certain segments of the Australian property market, particularly in the long term, as I will explain in this article.

It wasn’t that long ago that the media was forecasting a property bust and that Australia’s house prices could fall up to 30%.

The one-in-100-year pandemic we are working our way through had almost all the analysts suckered into becoming property bears with extraordinarily pessimistic projections of house price falls of 10 per cent (Westpac, NAB, ANZ, , CBA), 15 per cent (UBS), 20 per cent (AMP) and up to 30 per cent (SQM).

Now those housing bears are running scared.

I’m on record with my regular commentary as being much less pessimistic and now, around six months after housing market COVID-19 first hit our housing markets in our economy and the property markets are showing signs that we have turned the corner following a relatively mild downturn.

Sure, our property markets have been supported by the government throwing a lifeline at mortgage holders and tenants, as well as the RBA and the banks supporting our housing markets.

But isn’t the government’s job to look after its constituents?

It does this by providing hospitals, ambulances, schools police and a range of facilities and infrastructure.

And it is also protecting the wealth of the 70% of Australians who owned their own home and use them as shelter.

The government well recognises the importance of feeling secure in your own home and how devastating to the economy it would be if property values fell significantly.

So I believe it has done its job well.

Having learned from previous economic downturns, it has gone in early and thrown everything including the kitchen sink at minimising the impact of this recession on the economy and on our housing markets.

Way back at the beginning of the pandemic Scott Morrison said he was going to build a bridge to get us across the other side, and it looks like he’s done that and it seems that we are standing on the other side now.

Fact is, 2021 is likely to be a year of economic recovery after a challenging end to 2020.

However let’s start with the current situation:-

While initially the underlying trend in property prices was to soften in the wake of the pandemic, there are some positive trends emerging.

Since Australia’s international borders were closed on 22 March;

  • Sydney prices have increased 1.5%,

  • Melbourne have softened by 2.9%,

  • Perth property values eased by 0.1%,

  • Brisbane home values have risen 2.7%,

  • Adelaide prices have risen 3.5%.

And median property values are higher than they were 12 months ago in all our capital cities.

What’s ahead for our economy?

There are signs that Australia’s recession is now over, but the economic road back to recovery will take years.

Most leading economists believe the September quarter will show Australia’s economy grew, even with the second-wave virus-induced shutdown in Victoria.

So, it seems by the time we found out we had experienced the worst downturn since the Great Depression, we’d already entered the next boom.

Of course, it’s not all rosey.

There are still around 2.5 million Australians either unemployed or underemployed, and wages growth is at record lows.

However there is a raft of good news suggesting our economy is on the road to recovery.

1. Consumer and business sentiment is recovering

Aussies are feeling more confident about their future and surveys suggest they believe it’s a good time to buy large consumer goods and buy property.

Consumer sentiment is now at its highest level since November 2013.

Compared to prior downturns, the recovery in consumer sentiment is the sharpest seen in the history of the series and reminds us of the unusual nature of this shock and the extensive government support provided to households and businesses.

2. We’re spending more

The major banks regularly report their internal data on credit card spending and consumer activity which this has lifted strongly over the last few weeks in part due to the opening up of Victoria but consumer spending is also strong in other states.

Going forward, consumer spending faces headwinds from elevated unemployment, weak wages growth, tapering income support and weak population growth.

The government recognises that consumer spending is a key driver of economic activity and that’s one of the reasons it is so keen to reduce unemployment and support our economy.

3. Property markets have turned the corner

When Australians feel comfortable and confident about the value of their homes, their castle, they experience a wealth affect which encourages them to spend more.

4. The Stock Market is Rallying

Rising stocks prices are important for several reasons – they show investors are confident in the earnings and profits of the business sector and they boost the wealth of shareholders which underpins confidence and spending.

5. A vaccine may be close

This will boost confidence and possibly allow Australia to open its borders.

Clearly uncertainty remains but with Melbourne’s lockdown now ended this will kickstart the recovery in Australia’s second largest economy.

However the recovery in the other states are slowing a little, yet all the leading economists believe Australia will see significant economic growth moving forward.

What about house prices?

What will happen to our property markets will depend upon how soon our economy picks up, the level of unemployment reached and importantly the level of consumer confidence coming out of our recession.

At the same time, with banks extending borrowers a lifeline in the form of deferred mortgage payments, there is no forced

selling at present and this plus the lack of new properties being listed for sale is underpinning property values.

Fortunately, our Federal government has learned a lot about handling monetary and fiscal policy during economic downturns resulting in the slashing of interest rates, the introduction of Quantitative Easing and our spending $300Billion plus to build a bridge to get us through this and will now doubt spend a lot more to kickstart the economy.

And of course the State governments have introduced their own support and stimulus packages.

Clearly our housing markets haven’t been immune to the Coronavirus economic fallout, but the impact on property values has been minimal and the markets are clearly on the move again.

Westpac bank recently upgraded its house price predictions suggesting double digit growth in our capital cities over the next 2 years.

ANZ have made some more conservative property market predictions for the next year:-

And more recently, 20th November 2020, the NAB changed their view on property prices for the next year and now expect rises of around 5% over 2021 and 6% over 2022 – with house price growth likely to be stronger than the apartment segment.

This change in NAB's housing market outlook comes after their forecasts for near-term activity and unemployment, as well as the fact that activity in the housing market has held up substantially better than they initially expected.

NAB now expect that lower interest rates for an extended period will be a key support to the housing market over the next couple of years, seeing a boost to prices across the country. ‘

While the deterioration in the labour market would normally weigh on house prices, the significant government support has mitigated the rise in unemployment and hit to household incomes.

However, the NAB sees the sharp slowdown in population growth due to border closures as the key risk to house prices, particularly for Sydney and Melbourne.

Of course at times like this, forecasting median house values or even forecast figures are of little value.

One needs to get more granular to understand what is really going on.

Each state is divided into multiple markets, by geography, price point and type of accommodation.

Each of our capital cities has an inner and near CBD property market, a inner suburban market, a group of middle ring suburbs and outer suburban property markets.

And then there are apartments – either high-rise or medium density, townhouses, villa units and houses. There are also new and establish property markets.

And more recently, 20th November 2020, the NAB changed their view on property prices for the next year and now expect rises of around 5% over 2021 and 6% over 2022 – with house price growth likely to be stronger than the apartment segment.

Currently most of the property sales occurring are in the lowest price points with few discretionary sellers in the more established suburbs and higher bracket suburbs.

This means that the palette of properties currently being sold is generally in the lower price bracket and this alone will bring down reported median home values.

But this doesn’t accurately reflect the value of particular properties in any specific market, but more of the types of properties being sold.

We regularly report buyer demand as being shown by’s Weekly Search Report and as you can see from the chart below, buyer demand is considerably higher than a year ago.

Moving forward some areas will languish

Moving forward some suburbs are likely to still experience falls in housing values.

Just think about the typical demographic who bought in the new housing estates in the outer suburbs of our capital cities.

Residents there are typically at the same stage of their life cycle, getting their foot on the property ladder, setting up their families, paying a large mortgage and carrying significant credit card debt.

These are the types of locations where residents are more likely to suffer mortgage stress, and if people need to sell up, at a time when their neighbours are in the same boat, property values could drop significantly.

The same is true for the many investors who have bought cookie cutter apartments in and around our CBDs and who now have minimal or even negative equity in their properties.

With few new investors buying this type of property, CBD apartments are likely to fall in value significantly.

On the other hand, the demographics of our established middle ring capital city suburbs are very different as they are populated by a range of families at different stages in their lifestyle.

Some residents would have bought their property 30 to 40 years ago and paid off their mortgage a long time ago.

Others may have purchased the property 15 years ago and paid off a significant portion of the debt while living in the same street there would a few newer residents who have significant level of debt against their homes.

In these suburbs demand currently demand is higher than the undersupply of properties available and values in the suburbs are likely to hold up well.

As some sectors of our economy will be affected more than others so will various sectors of our real estate markets.

The largest and most direct industry shocks from the coronavirus have been in:-

  • Tourism, local restrictions will ease up before and overseas travel restrictions may take some time to lift;

  • Hospitality, where social distancing leads to a decline in café, bar and restaurant patronage;

  • Education, due to fewer foreign students being able to travel;

  • Retail, which will be dragged down by low consumer confidence levels; and,

  • Recreation, theatres, cinemas and art galleries have closed down.

The following chart suggests that Hobart will be more affected than other capital cities by the strict social distancing measures imposed to prevent spread of COVID-19.

At the other extreme in the ACT, where employment is more concentrated amongst public Inspiration, employment and incomes not as broadly affected.

Not surprisingly people working in the accommodation, food services and recreation industries have been hardest-hit in losing jobs over the last few months – see chart below.

If you think about it, many of these people will be younger and living in rental accommodation rather than being home owners.

This suggests our rental markets will be harder hit than our housing markets, and that’s actually how things are playing out .

Supply and demand

For the last few decades, continued strong population growth has been a key driver supporting our property markets.

Australia’s population was growing by around 360,000 people per annum, meaning we needed to build around 170 to 180,000 new dwellings each year to accommodate all the new households.

Since 60% of our growth is dependent on immigration, in the short-term population growth will fall, but they should increase again as soon as overseas immigrants will be allowed to come to our shores.

In the meantime, the oversupply of dwellings in many Australian locations is now dwindling and there are very few new large projects on the drawing board.

Considering how long it takes to build new estates or large apartment complexes, we’re going to experience an undersupply of well-located properties in our capital cities in the next year or two.

In the next few months supply will be constrained because of very few vendors are putting their properties on the market.

Think about it… unless you really had to sell you wouldn’t place your property on the market today would you?

The lack of good stock at a time when there is still reasonable demand by purchasers looking to take advantage of the opportunities the market presents means it is unlikely house prices will fall dramatically.

What about affordability?

With interest rates at historic lows, housing affordability is as cheap as it ever has been.

I’m not saying the properties are cheap – they never have been if you want to live in great locations in major world class cities.

But for those first home buyers wanting to get a foot on the property ladder, or established home buyers wanting to upgrade, or investors looking to hold onto a property, the holding costs are less than they ever have been.

And the RBA has declared that interest rate will not increase until unemployment is back to within their preferred range of around 4.5%.

They have said this will be unlikely to occur in the next three years.

In other words we are in unprecedented times where we don’t have to worry about rising interest rates the foreseeable future.

House price forecasts

In the medium term, property values will be linked to the extent that quarantine measures affect income, employment, borrowing capacity and credit availability.

However, I’m comfortable with the underlying long term fundamentals supporting our property markets in the medium to long term.

Let’s look at a couple of them…

  • Population growth

As I said, in the short-term population growth will fall, but this should increase again as soon as overseas immigrants will be allowed to come to our shores.

Australia is likely to be seen as one of the safe haven’s in the world moving forward.

  • Declining housing supply

The oversupply of dwellings in many Australian locations is now dwindling and there are very few new large projects on the drawing board.

Considering how long it takes to build new estates or large apartment complexes, we’re going to experience an undersupply of well-located properties in our capital cities in the next year or two.

  • Interest rates are low and will go down further

The prevailing low interest rate environment is making it easier to own a home, either as an owner occupier or investor.

In fact, it’s never been cheaper for investors to own a property with the “net outlay” – the out-of-pocket expenses – being the lowest they’ve been for decades considering how cheap finance is today.

  • Smaller households are becoming the norm

Sure many people live in multigenerational household, but pretty soon Millennials will make up one third of the property market and their households tend, in general, to be smaller as are the households of the booming 65+ year old demographic.

More one and two people households means that, moving forward, we will need more dwellings for the same number of people.

  • More renters

Soon 40% of our population will be renters, partly because of affordability issues but also because of lifestyle choices.

The government isn’t providing accommodation for these people. That’s up to you and me as property investors.

  • First home buyers are back

First home buyers are back with a vengeance, in part thanks to the government’s new scheme to encourage them, but also because of cheap finance and rising property values.

As opposed to established homebuyer who have a “trade in” that is increasing in value, if first home buyers wait to get into the market they’re finding the market moving faster than they can save, so they’re hopping on board the property train as quickly as they can.

  • The underlying fundamentals are strong

Sure our economy is taking a hit and the share market is volatile, but our property markets are underpinned by the fact that 70% of property owners are home owners who are there for the long term.

They’re not going to sell up their homes – they’d rather eat dog food than give up their homes.

And the Australia’s banking system is strong, stable and sound.

Even though a few home buyers have overcommitted themselves financially, there should be no real concern about household debt because, in general, it is in the hands of those who can afford it.

There is currently a very low rate of mortgage default of mortgage to increase.

As the community starts to become more concerned about the economic impact of the corona virus, it is likely that there will be a flight to quality assets, and bricks and mortar have always stood the test of time.

In other words, the share market volatility will make some investors look to real estate as an alternative secure investment vehicle underpinned by 7 million homeowners in Australia.

In fact, it the only investment market not dominated by investors.

Sydney Property Market Forecast

Sydney posted its first monthly gain in housing values in October after five months of consistent falls.

The October result was only slightly positive, up by 0.1% over the month, with house values driving the gains, rising half a percent.

Meanwhile, unit values continued to fall, down half a percent.

Through the COVID period downturn, Sydney home values from a peak-to-trough perspective were down just -2.9%, but values are still 5% lower than their mid-2017 peak.

This is a stark reminder of the two year downturn Sydney’s housing market experienced prior to mid-2019.

Home sales are up 18% over the rolling quarter and roughly level with the same time a year ago based on the three month trend in settled sales estimates.

While home values are remaining resilient, rents have declined and vacancy rates for inner city and near city apartments have increased.

Despite the recent weakness, Sydney home values remain 6.1% higher than a year ago.

Home sales are up 18% over the rolling quarter and roughly level with the same time a year ago based on the three month trend in settled sales estimates.

While home values are remaining resilient, rents have declined and vacancy rates for inner city and near city apartments have increased.

Despite the recent weakness, Sydney home values remain 6.1% higher than a year ago.

In the last month or two there has been a resurgence of buyer and seller interest in the Sydney property market and auction clearance rates have consistently been in the high 70% range.

This implies an improvement in buyer demand and a better fit between buyer and seller pricing expectations.

This is a great time for cashed-up investors and homebuyers planning to upgrade to buy a property for considerably less than they will have to pay this time next year.

However B grade (secondary) dwellings may still fall in value a little further and C grade properties are likely to have real difficulty finding a buyer.

Melbourne Property Market Forecast

Before Coronavirus hit our markets, Melbourne property prices were surging with dwelling values up 12% higher to reach new highs.

While Melbourne housing values suffered because of its extended lockdown, which severely impacted market activity over the past three months, with CoreLogic estimates showing a 34% drop in settled sales compared with the same period a year ago.

But commencing in early November the Melbourne property market has rebounded.

​According to Corelogic Melb values climbed 0.22% in the first 12 days of November, outperforming Sydney, Brisbane & Adelaide.

Brisbane Property Market Forecast

Brisbane’s property values remained resilient over the year, especially given the economic impact of COVID-19.

Price growth or residential real estate had been more subdued in the lead up to the COVID-19 outbreak compared to Sydney and Melbourne and, in turn, Brisbane only experienced a mild downturn and property values have now been rising over the last few months.

With the success in containing COVID-19 and its associated restrictions and the RBA assuring us that the recession is over, property market confidence has lifted and Queensland has recorded an impressive recovery in house prices.

First-home buyers are taking advantage of incentives and established home buyers with secure incomes will be lured by historically low interest rates

At the same time investors, not only from Queensland, but from interstate are finding the price points and rental returns of Brisbane property very favourable.

Domain’s Buyer Demand Indicator shows houses remain a firm favourite of prospective home hunters, with demand rising post-lockdown and it remains significantly elevated compared to last year.

However, unit demand has been sliding since late May although remains slightly higher than last year, with investment stock (not investment grade stock but those poorly built and designed high rise apartments) likely to be impacted most.

Westpac Bank recently updated its property forecasts, with Brisbane prices tipped to surge 20 per cent between 2022 and 2023.

Brisbane is likely to be the one of the best performing property market over the next few years, while some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long term investments, certain submarkets should be avoided like the plague.

While some locations in Brisbane have strong growth potential, and the right properties in these locations will make great long term investments, certain submarkets should be avoided like the plague.

Canberra Property Market

Canberra’s property market has been a “quiet achiever” with dwelling values having reached a new peak after growing 6.8% over the last year .

Considering a large percentage of Canberra population is employed by the government or industries supporting the public sector, Canberra’s property market has not really felt the effects of the upcoming recession like our other capital cities did.

Perth Property Market Forecast

Perth’s long awaited recovery was interrupted by COVID-19 with values falling over both May, June and July but now Perth’s housing market is back on a recovery trajectory, with home values posting a third straight month of rises.

Values are 0.8% higher over the past three months, but that wasn’t enough to reverse the earlier 2.2% drop recorded through the early months of COVID.

Housing market activity has been tracking higher, with CoreLogic’s estimate of settled sales over the past three months 13% higher than a year ago.

Perth continues to show the lowest median house values of any capital city, at $475,200.

Such low housing prices, along with record low mortgage rate, improving economic conditions and government incentives are some of the factors supporting renewed price growth.

Rental markets are amongst the tightest of any capital city, with the lift in rents through the COVID period to-date the highest amongst the capital cities.

Hobart Property Market Forecast

Hobart was the darling of speculative property investors and the best performing property market in 2017- 8, and while dwelling values reached a record high in February 2020, its boom interrupted by Covid-19.

Hobart property values are again with values up 6.5% over the past year.

Adelaide Property Market Forecast

Adelaide’s housing market has moved from strength to strength over recent month, with home values reaching a new record high in October.

Dwelling values were 1.2% higher in October and that was the largest monthly gain since early 2008, just before GFC induced correction.

Relatively low housing prices, an effective flattening of the virus curve and the stimulus of low interest rates are likely to be the main factors behind the growth in housing values.

From a geographical perspective, every sub-region of Adelaide has recorded a rise in values over the past three months.

The strongest growth conditions were in Onkaparinga, where housing values are estimated to be 5.4% higher over the rolling quarter.

7 views0 comments

Recent Posts

See All
bottom of page